Terry Bradshaw, the former NFL quarterback turned Fox sports commentator, kicked off the good news portion of the University of Arkansas for Medical Sciences’ presentation to the UA Board of Trustees today, praising orthopedic surgeon Dr. Lowry Barnes for his surgery to replace Bradshaw’s knee that the football great said reduced his pain by 100 percent. “Honest to God, this is a wonderful place,” Bradshaw told the trustees.
Barnes, chair of orthopedics at UAMS, and Dr. Jim Suen, UAMS’ famed head and neck surgeon of 41 years, brought the trustees up to date on the progress their departments have made in clinical care. Barnes touted an increased staff, patients and revenues and new procedures now available; Suen gave the long view of changes at UAMS. He said the Affordable Care Act, which has reduced uncompensated care, had been a major help to the bottom line. But, he added, the Arkansans remain unhealthy and more doctors are needed. Research and teaching is taking a backseat to clinical work because doctors at UAMS have to generate their salaries from clinical fees. Suen noted that UAMS employees generate more state revenues in the way of income taxes and their own spending than the institution gets back in state aid.
That was the segue into the real business of the day: Chancellor Daniel Rahn’s plea for more state dollars for an institution he called “critically important for the future of Arkansas.”
The state’s allocation to UAMS in 2015 was $106,602 million. That was a $14 million reduction from 2014, when the allocation was $120,112 million in 2014 (a peak). In previous years, state aid was around $114 million. That is less state support, as a percentage, to peer institutions in Louisiana, Mississippi, Oklahoma, South Carolina, Tennessee and Texas, Rahn told the board.
Of the $106.6 million, UAMS must use $85,075 million as its Medicaid match, leaving only $21 million, or 1.46 percent of its budget, for academic and hospital support.
Rahn noted threats to future revenues, include a possible decline in Medicare reimbursement by 20 percent and the “unsettled” the future of the private option. Revenues from its clinical programs now make up 74 percent of UAMS’ budget.
Rahn also said that because the College of Public Health and the UAMS Northwest Campus were “launched with inadequate funds,” the clinical programs must support those programs, along with pharmacy, nursing, and its other schools.
Rahn told the board that UAMS, without additional funding, will not be able offer the programs it does today, which would trigger what he called “a death spiral.” He wants to see state support increased by $18.2 million, through a restoration in its budget allocation and the elimination of the administrative transfer of $9 million it’s required to make out of its Medicaid match dollars to the Department of Human Services.
UAMS has been working on its financial difficulties, and in consultation with Navigant Research has managed to save around $82 million in the past five years. That meant leaving staff positions unfilled; other savings have come from energy, procurement and other business practices. Still, it is still experiencing a decline in assets, Rahn told the board. If UAMS were to continue its current expense reduction strategy, projected at $23 million, it’s predicted to still see a reduction in net assets, of $24 million in fiscal year 2017, a number that will rise to $45.8 million in fiscal year 2021.
That doesn’t mean UAMS is spending more than it takes in. Part of the decline in its assets is depreciation, which averages at $70 million annually.
“The number one issue,” Rahn said after the presentation, “is recurring operating dollars,” money that can be counted on year after year.
UAMS’ new capital needs include, at a minimum, $13 million to bring the Central Building — the old hospital building, now used for offices — up to code by 2021, by order of the state Fire Marshal. The institution would like to renovate the entire building, which dates to 1955, as modern office space, which would cost an estimated $85 million. Financing that debt would cost $6 million annually.
Trustee C.C. “Cliff” Gibson III, who with other trustees had been given a tour of the Central Building before the meeting, called the building’s condition “embarrassing for a world-class institution,” with boarded up windows and AC units hanging from others. He said UAMS’ needed to get is message “out to the people of Arkansas, their representatives and the governor.”
“All I see is red on the page,” Gibson said. “How long is UAMS able to run a deficit before cutting services more?”
The answer, Rahn said, is up to the UA board.
Gov. Hutchinson, who sent representatives to the tour of the old building, provided the Times with a comment on UAMS’ presentation today:
I was briefed on the UAMS budget and am aware of their financial situation as well as the steps they are taking. I certainly applaud Dr. Rahn for his initiative in making sure UAMS gets an early handle on their budget concerns, as well as remaining strong as a leader in training and research.
Meanwhile, the legislature has implemented cuts of an estimated $182.5 million in capital gains and income taxes in the past three years. ($102 million during Hutchinson’s tenure and earlier cuts in capital gains of $24.5 million and income taxes for high earners of $56 million.)